Has American Fork fixed its broadband network woes? Hardly

Back on March 15, I filed a GRAMA request to get some more details on American Fork’s sale of AFCNet, their municipal broadband network, to a private party. The request was dutifully filled exactly 10 business days later on March 29. The documents revealed the terms of the sale, what was sold, and the payment history on the network. The following day, after years of silence about American Fork’s broadband, the Daily Herald publishes an article asserting that the city has managed to turn their city-owned broadband fortunes around. This, however, is an obvious snow job.

My first and most immediate problem is that American Fork appears to be preemptively trying to squelch any possible bad news about the city’s broadband efforts or the status of its residential broadband network after the sale using a PR-driven approach with one of the local papers. Whitewashing the issue is very irresponsible and does a disservice to city residents who deserve a clear picture of how their city government operates. The article in question reads like a press release, devoid of counterpoints or any negative information. The city using a press resource to try and soften the blow does nothing for said reporter’s professional reputation. Journalists are not supposed to be carrying water for the city, and Barbara Christiansen, the reporter in question, should know better.

This brings me to my second point. The headline, “American Fork may soon be in the black with its broadband”, is, at best, blatantly misleading. The city purchased the broadband network in 2003 for $6M and spent anywhere from $4-6M on upgrades and upkeep. (I’m planning on filing another GRAMA request for those exact figures.) The residential portion of the network were later sold to Surpha (now American Fiber Inc. or AFConnect) for the fire-sale price of $500K back in 2008. The buyer has been perpetually running a balance with the city, failing to stay current on payments almost from the get-go. The only time that American Fiber was not in arrears, according to city records, were July and October of 2008. This hardly sounds like a success story to me.

And don’t get me started on the sold network itself. The sale was billed as a way to preserve services in the city while staunching the flow of money from city coffers. The speeds sold on the network, however, haven’t changed since the original sale and remain stuck at 15Mbps. There’s also no phone or video services available, services that are often badly needed to boost ARPU. Given that the network is using CAT5 for the copper last mile (no, you read that right) and American Fiber has been unable to stay current on payments, I don’t foresee this changing anytime soon. When there’s no room for upgrades, it’s a slow death march as the system decays and subscribers jump ship to better options.

It’s also troubling that, after spending from $10-12M, a $660K contract over 20 years is considered a big enough deal to right the ship. (Perspective: that’s $33K per year, not even enough to cover someone’s salary.) Even combined with a $1.98M reserve and the sale of the residential network, it doesn’t even come close to covering the spread. Naturally, this doesn’t yet include the city’s usage or their leasing deals with other entities, but I have a hard time seeing how those can bridge the $7-9M gap that’s left when all is said and done.

I’m planning on asking for additional details of the city’s broadband network including subscriber numbers from prior to the sale and financial data for the broadband department from 2003 to current. I’ve also requested an interview with American Fiber Inc without getting any response. If they change their mind, I’ll happily include their perspective.

4 Responses to Has American Fork fixed its broadband network woes? Hardly

They spent almost all of their bond on building out that fiber to the Kerns building. They spent very little money with the residential network, and were happy to dump the residential stuff on Surpha. If only AFcity would stop subsidizing Surpha.

That residential network is an albatross.

There really is potential for AFcity to be in the black with their dark fiber. Zayo, Utopia, Integra?, Syringa?, XO? others have bought that fiber.

My guess is 9 miles avg * $100 per strand * 45 strands is about $500K per year.

Didnt they sell Utopia 6 strands for like 2 million?

With 12 more strands, thats about $150K more per year. I am totally guessing on all these numbers.

But that leaves a good 20 or so strands left for them to lease.

Looking good if you ask me. Get Cogent, Level3, and a government agency like the NSA and they are all set.

They’re in much deeper trouble than that. Filings with the State Auditor’s Office show a cumulative loss of over $3.8M between FY2005, the earliest year they have, and FY2011. In FY2011, they had revenues of $258K and losses of almost $370K. FY2012 is the last year they can count on around $100K worth of payments for AFCNet, a sizable chunk of their revenue. Whatever it is they’re doing, they’re doing it wrong.

I’m submitting another GRAMA request today to see if I can scope out the full extent of the problem. So far, it looks like a case of gross mismanagement.

When American Fiber purchased AFCNet, they leased fiber lines to the Kearns Building for $50 per mile per strand. (See Exhibit A to Purchase Agreement, item 17.) Given the plethora of middle-mile fiber along the I-15 corridor (UTOPIA and iProvo also have a lot of fiber there), I doubt that the price to lease those lines would have doubled in four years.